CHINA GROWTH SLOWS

China's paper industry is quickly transitioning into a slow-growth phase that poses challenges to pulp and wood fiber suppliers to that country.

Much of the growth in production is in packaging grades, which primarily use recovered fiber, not virgin wood pulp. Still, furnish shares in China are changing quickly for other grades of paper, which will support a rising trend in imports for bleached hardwood and softwood kraft pulps. These and other findings were recently published in The China Pulp Market in Transition: A Comprehensive Analysis and Outlook, a new study by RISI.

Since 2012, the market has experienced a steep decline in growth of paper and board demand and production. Production growth has averaged at 3% per year — a striking difference to the 10.9% average growth per year during china's “golden age” of the paper industry from 2002-2012. Graphic paper consumption is no longer keeping pace with rising income levels in China. However, for tissue and packaging grades, the link between economic growth and consumption is expected to remain strong. In order to project future demand, exporters of pulp into China may be more reliant on “on the ground” information regarding these changes.

“In China's transitioning markets, exporters of pulp to China will have to count on solid gains of fiber shares as well as in paper and board volumes if they want to justify rapid expansion of market pulp capacity in other regions. During this transition, forecasts for future pulp demand will be heavily dependent on information about the state of furnish shares,” said Kurt Schaefer, the lead study author and Vice President of Fiber at RISI.

“For investors in pulp market projects around the world, the challenge will be projecting where future demand will come from. In the recent addition of the China Pulp study, we try to bring insight into these changes with expanded coverage of furnish share trends and nonwood pulp mill costs and closures,” Schaefer said.